Experts expect cash rate to rise in December

Oksana Patron

5 December 2022

The majority of experts believe the cash rate will change on Tuesday by 25 basis points, bringing it to 3.10% in December, according to the Finder RBA Cash Rate Survey.

However, less than a half of panellists thought the Reserve Bank of Australia (RBA) would raise the cash rate in February next year.

The current series of hikes already added almost $10,000 to the annual cost of to $500,000 mortgage, putting in distress many homeowners with more than one in three having struggled to pay their mortgage in November.

From the start of the year the total number of Australian homeowners who experienced difficulties in paying their mortgage grew from 23% to 35% in November.

According to Graham Cooke, head of consumer research at Finder, an eighth consecutive rate hike could be the final nail in the coffin for many.

“Australians with a $500,000 mortgage will be forking out almost $900 more per month compared to what they were paying in April,” he said.

‘“That’s a significant amount of extra money to pay every month. However, some panellists are predicting it could get even worse.”

The majority of panellists who weighed in (83%, 29/35) believed the cash rate would peak between 3.25% and 4%, with over two thirds (71%, 25/35) expecting it would peak in the first half of 2023.

“Still high inflation, strong jobs and wages data and the absence of an RBA meeting in January are likely to drive another 0.25% hike in December to 3.1% (with the risk of one more hike to 3.35% in February) but by end 2023 we expect weak growth and a sharp fall in inflation to drive the start of rate cuts,” Shane Oliver, AMP Capital’s chief economist, said.

Finder’s forecast also indicated that ‘the worst for renters was yet to come’, with a predicted average increase of 6% in rental prices in Sydney, Brisbane and Canberra next year.

At the same time, experts forecast a 7% increase in Melbourne, a 4% increase in Darwin, and a 5% increase in Perth, Adelaide and Hobert in 2023.

“Renters around the country have had a challenging year – the latest Rental Affordability Index shows that all capital cities experienced a drop in rental affordability in 2022,” Cooke added.

“Finder’s Consumer Sentiment Tracker shows a whopping 39% of Aussie renters struggled to pay their rent in November, and unfortunately it could get a lot worse.”